Advancing Human Capital Evaluation

In the past, I have written quite a bit about an education evaluation tool called Degreed, both lauding and criticizing the service in different ways. Some of the criticisms are beginning to be addressed, although they are being addressed by the market at large, including competitors, rather than Degreed itself.

Test-Based Online Credentials are where it’s at. This article from SkilledUp is a great introduction. A company called Smarterer seems to be leading the space for the moment, but it’s very much a wide-open game at this point.

Let me run through a recent history of approaches to learning:

  1. Most people went to high school. Fancier people went to vocational training and only real fancy people went to college. (< 1960s)
  2. Then, everyone went to college. (1990s +)
  3. College degrees began to be complemented by certifications and so forth. (1980s – 2000s)
  4. Degrees and certifications began to go online. Smaller firms, not just large universities, began to produce alternative forms of education which were increasingly accepted. Badges were introduced. This is where mainstream culture is today. Resumes look like garbage dumps and it’s hard to sort out strong from questionable credentials. (2000s – today).
  5. Degreed sorts the garbage dump and churns out education scores, a subgroup of human capital measurements. Education scores exist both for general education and specific topics. Unfortunately, these scores are hard to understand, not very accurate once properly understood, and not widely used or valued.
  6. In the future credentials will have at least three important qualities, and the process has already begun through Smarterer:
    1. The issuing bodies will have a known reputation of quality. Employers will be able to accurately, and eventually quantitatively, anticipate the productivity of a potential hire just by knowing their competency scores.
    2. Scores will be more accurate. For example, they might measure skill quality on a scale of 1 to 100 instead of pass or fail.
    3. Scores will be both qualitative and quantitative. For example, a score might say, “Jimmy got a 64/100 in programming and one way to improve his score would be for him to practice writing Javascript scripts for websites,” as opposed to, “Programming: 64/100.”
    4. Scores will be created for more than education. Health scores, grit scores, friendliness scores, and more.
    5. Scores will allow effective comparative evaluation of competitors. Importantly, information on the distribution of scores will be made known. We will be able to compare an individual to another individual, to the average score, to the median score, to the top and bottom scores, with knowledge of the standard deviation and distribution shape.

As the market for Test-Based Online Credentials matures, and I think we can generalize this development model across technologies to some degree, we might expect certain things to occur:

  1. The market will become more distributed. It will begin with a small group of innovate firms or individuals, perhaps even a singular entity. Competitors, producing substitutes of varying degrees, will increase. Eventually, individuals or automated systems will be able to perform the entire service.
  2. The market will become inter-compatible. At first, competitors will attempt to niche, creating a fractured market. Later, and we see this happening now, two forces will drive market inter-compatibility. The first force is a secondary market for translators and aggregators. This is where Degreed fits into the alternative education market. The second force is the consumers themselves. Consumers will demand inter-compatibility for at least two reasons. First, this promotes the credibility of a test score received from any of these institutions. Secondly, this reduces transfer costs for the case in which a consumer wants to leave one company and transact with their competitor. Suppliers will be slower to grant decreased transfer costs, but it will eventually achieved. In the longest run, individuals will be able to freely exchange this information accurately and without the need of any sort of intermediary.
    1. We already see the longest run developments occurring to some degree at the forefront of certain advanced information industries. In programming, for example, an need not have any credential or even work experience to be seriously considered for very lucrative employment. Instead of providing indicators of skill, the individual can directly evidence skill. This can only be done when the potential employer is equipped to understand the demonstration. This often takes the form of a portfolio of work.
    2. We also see the same thing happening in very old industries. Artists can utilize direct
  3. The market will develop superior products. Perhaps the format of the tests will change, or perhaps a solution altogether different from testing will be developed. Certainly the tests will grow to cover more topics, they will become available for reduced prices, and they will be refined to produce better indication of skill, including elimination of systematic bias in the tests. They will also eventually develop into ways which are unanticipated at the moment.
  4. The gains from this market will externalize to improve other markets and, eventually, arbitrarily macroscopic economies. Refining these tests to improve the information they convey may involve eliminating systematic bias which can be traced into the subject matter being taught itself. This can lead not only to improve the testing of the thought type, but to improve the thought type itself. Imagine that understanding how a particular book is written can lead to an understanding of why the book itself could have been written better in certain ways. Quality testing in a variety of subjects will lead to better development of the subjects themselves. This will translate to efficiency of production and information in every market which is tested.

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